General Market Thoughts and the Case for Change at Humm with Jeremy Raper
Summary
Jeremy Raper stopped publishing because writing for a paying audience had begun to distort where he invested. His edge remained undercovered, misunderstood small- and mid-cap deep value, often with an event, but publishing pulled him toward ideas in styles and sizes divergent from where he believed he made the most money; after quitting, he felt “the lifting of a weight.” He still writes private memos, while conceding that fewer inbound ideas and relationships make the decision “not an unadulterated win.”
Japan’s large-cap activism trade may be in the sixth or seventh inning, but Raper thinks regional companies below roughly $500-700 million—and certainly below $1 billion—remain in the second or third. Tokyo Stock Exchange governance, ROE, and price-to-book pressure has only slowly reached family-run companies outside Tokyo. At 0.4-0.5x book, with net cash or borderline negative enterprise value, receiving only half the cash over four years could still produce a 60-70% return. Walker’s response: “Sign me up, baby.”
Walker’s key objection is that Japan’s remaining bargains may also be the companies hardest for activists to influence. A family trust dispersed across dozens of descendants can still control 25%, while cross-shareholdings and insider ownership can make a nominal 10% activist position ineffective. Raper conceded there will be recalcitrant holdouts—“probably all the ones I own”—but believes the direction of travel now outweighs the risk of slower realization.
The UK is statistically cheap, but Raper’s own record—perhaps one winner in ten, or two in 12-15 over three years—suggests governance can consume the discount. His emblematic case was Cambria Automobiles (CAMB): an inadequate management buyout paired cash with an ostensibly voluntary but practically unusable rollover into a delisted security. Investors were effectively asked to remain “handcuffed” to the team attempting to underpay them, while an independent expert could deem the arrangement “not fair, but reasonable.”
Raper and an aligned shareholder, together owning just over 9% of humm group, have called a February 19 EGM seeking board renewal. The six resolutions would remove three of four directors, including the nearly 30% shareholder-chairman; appoint Raper and another nominee; and protect against incumbent board appointments before the vote. Raper personally owns 5.7% and has put about A$20 million of his own money into the position: “I have the whole shebang in the game.”
Raper’s HUMM thesis is “good company, bad governance,” anchored by a commercial asset-finance business growing at double digits with loss rates below 2% of ANR. The consumer portfolio is mixed, but the company had not lost money in the GFC or COVID. Against tangible assets of A$0.76-0.77 per share and sector valuations around 10x earnings or at least tangible book, the chairman’s A$0.58 proposal represented roughly 5x earnings and 0.7x tangible assets.
The board’s handling of the chairman’s bid, rather than the bid alone, became Raper’s case for removal. It allowed almost five months of diligence without a standstill, market test, or capital-return alternative, then disclosed a credible third-party A$0.77 proposal only after shareholders filed to remove directors; the chairman subsequently bought roughly another 3%. Raper argues a renewed board could establish a dividend policy, distribute excess cash, conduct a strategic review, investigate the prior board’s conduct, and prevent minorities eventually being acquired at “a massive undervalue.”
Deep dive
1. Public writing became an investment-process liability
Raper began publishing on Seeking Alpha around 2013 or 2014 because writing imposed “an external discipline on an idea.” If he could not develop a thesis “coherently and cogently” on paper, he questioned whether it was genuinely workable; Walker agreed that unresolved questions often become visible only after thoughts reach the page.
A second objective was building an “intellectual track record” before he had meaningful capital or a formal portfolio-manager record. He hoped public calls might eventually help him raise substantial outside money; his blunt retrospective was that this “didn’t turn out to be true at all,” although the exercise still improved his investing.
After 10-12 years, a broad paying audience began influencing idea selection. Raper’s best niche was undercovered small- and mid-cap deep value with an event, but limited liquidity made those ideas unsuitable for nine-figure readers; publishing therefore nudged him toward styles and sizes divergent from where he believed he made the most money, notwithstanding major exceptions such as Twitter.
Raper no longer needed subscription income, felt more pressure than pleasure, and returned to writing chiefly for himself. Inbound ideas and relationships declined—a drawback he openly misses—but dropping the obligation freed him to revisit his original strategy. He also noted that U.S. event situations had become more competitive, volatile, and crowded by writers.
2. Japan’s remaining opportunity has migrated down-market
Raper rejected private-equity claims that all of Japanese activism remains in the second or third inning. For larger and upper-mid-cap companies, he thinks extraction of the obvious event-driven and governance “low-hanging fruit” has reached perhaps the sixth or seventh inning, even though simply buying disclosed activist targets over the prior 12-24 months would have generated “an astounding amount of alpha.”
The institutional catalyst began with Abenomics, then accelerated when the Tokyo Stock Exchange reorganized its listings and tied Prime listings to governance, independent directors, ROE, and price-to-book expectations. Those requirements became forceful only about four years earlier, with specific P/B and ROE pressure intensifying over the subsequent three years; reform has barely reached the market’s smaller end.
Raper wants to anticipate “where the puck is going to be”: family-operated companies outside Tokyo, often in regional cities such as Nagoya or Osaka, that have not embraced the new regime. In Japan’s diffuse market, “small” can mean below $1 billion and especially below roughly $500-700 million, leaving a multiple-hundred-company subset of potential targets.
Walker’s pushback was structural: regional companies often combine family ownership with webs of cross-shareholdings, allowing many 50-basis-point descendants to aggregate into a blocking 25%. Raper did not dismiss that obstacle, but at 0.4-0.5x book, massive net cash, or borderline negative enterprise value, he views delay as tolerable: even half the cash after four years may still yield a 60-70% return.
3. UK cheapness comes with an expensive governance loophole
Raper readily agreed that UK equities are inexpensive on conventional statistical measures, yet his personal results have been “pretty bad”—roughly one for ten or two for 12-15 over three years. His diagnosis is not valuation but a governance framework that can permit conduct destructive enough to erase the apparent bargain, particularly in small-cap, takeout, and majority-minority situations.
Cambria Automobiles (CAMB) was his sharpest example. Management proposed an inadequate cash buyout but also offered dissenters a rollover, letting an independent expert argue that minorities were not technically forced to sell; in practice, most small equity owners cannot hold a delisted security, and rollover terms can lock them beside the management team that tried to underpay them.
Raper said the structure can defeat the coercion test: even a fundamentally unattractive rollover lets an expert say an offer is “not fair, but reasonable” because shareholders were offered an alternative to selling. He cited Hunter Douglas, where an opinion signed off at 65 was raised to the 80s after objections, while the equity value had started around 120, later rose toward 160, and was sold to a third party around 165-170 within six months.
Walker reinforced the point with a fairness-opinion example from biotech mergers: an opinion might bless a sale at 40, then bless a topping bid at 60. Both speakers’ examples illustrated how a nominal alternative or revised bid can make “fairness” highly malleable.
4. HUMM combines a cash-generative core with a conflicted board
Raper owns approximately 5.7% of humm group, and he and an aligned shareholder together own just over 9%. HUMM is an approximately A$325 million Australian non-bank lender whose chairman owns just under 30%; Raper has put about A$20 million of his own money into it and described himself not merely as having skin in the game but as being “pot committed.”
The commercial division is the “jewel”: one of the largest and most successful growing asset-backed finance businesses in Australia, growing at double digits for four or five years and producing cash with loss rates below 2% of ANR. Consumer is more uneven—cards businesses across Australia, New Zealand, the UK, and Ireland—but the UK had just become profitable, Ireland was doing well, and New Zealand remained profitable despite limited growth.
Raper stressed that his complaint is board-level stewardship, not current operations. The executives are relatively new after chronic turnover, the CEO has no board seat, and all directors are non-executive; he argues the ostensibly independent directors have nevertheless become captive to the chairman’s preferences.
HUMM had not lost money in the GFC or COVID. It reported roughly A$125 million of unrestricted cash against A$60 million of corporate debt, although the company disputes the accounting definition of unrestricted cash; Raper estimated that at least A$60-70 million was truly unrestricted. Tangible assets were A$0.76-0.77 per share when the chairman offered A$0.58.
5. The A$0.58 bid exposed a process built around the chairman
The chairman’s June proposal arrived after a 5% shareholder sold, depressing the price into the mid-to-high A$0.40s; its apparent 25-30% premium therefore referenced a last trade that Raper considered unrepresentative. At roughly 5x earnings and 0.7x tangible assets, it compared with peers around 10x earnings or above, the cheapest peer—Raper thought—around tangible book, and Shinsei Financial’s sale of its Australian consumer direct-lending business at roughly 1.2x tangible assets.
In the prior year, HUMM repaid roughly A$57-58 million of a mezzanine, debt-like instrument while the business generated about A$55 million of adjusted cash income. Raper argued it could instead have distributed comparable cash: against the then-A$250 million market capitalization, paying those earnings as a dividend would have implied a yield near 25%, versus sector yields of roughly 7-8%.
Raper immediately told the board the proposal was “insulting,” “derisory,” and clearly incapable of winning shareholder approval. Nevertheless, the board granted nearly five months of diligence without a standstill, market test, or independently developed BATNA; after the bid fell apart, the chairman was free to acquire additional shares. Walker called the absence of a standstill “creeping takeover territory.”
Walker separately raised concerns about the chairman’s participation in stock-price-sensitive matters during the bid, saying he was present at meetings discussing the annual accounts and noting press reports alleging that he massaged or edited a first-quarter trading update. Raper agreed that the chairman had been involved in the decision to repay debt rather than adopt a proper dividend policy, and said his fingerprints were over the company’s conduct. Their broader charge was that directors ignored minority shareholders and basic governance safeguards while the bidder-chairman examined the company from inside.
6. The February vote determines whether minorities gain an alternative
The governance dispute sharpened at the AGM. A formal meeting notice said the chairman would support a proportional-takeover defense, yet the resolution was withdrawn the day after his bid ended without an explanation; shareholders learned only at the meeting that he had switched to opposition. Because it required 75% approval, his nearly 30% holding could have defeated it.
After consensual renewal was rejected, Raper’s group filed a Section 203D notice seeking director removals. The company then revealed it had sat for about a month—without even signing an NDA—on a credible listed bidder’s A$0.77 proposal, 33% above the chairman’s A$0.58 offer. The bid was disclosed alongside the board challenge, which Raper argued cleansed the chairman to trade; he then acquired roughly another 3% over two days.
Six February 19 resolutions would remove three incumbent directors, including the chairman; install Raper and a second nominee; and protect against interim appointments. Raper’s promised agenda is governance reform, a sustainable dividend payout policy, excess-cash distribution, a full strategic review, and examination of the preceding 12 months’ conduct. His closing instruction was unusually direct: consider the shares only if prepared to vote.